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Buybacks in Treasury cash and debt management

Author

Listed:
  • Kenneth D. Garbade
  • Matthew Rutherford

Abstract

This paper examines the use of buybacks in Treasury cash and debt management. We review the mechanics and results of the buyback operations conducted in 2000-01, during a time of budget surpluses, and assess the prospective use of buybacks in the absence of a surplus. Possible future applications include (i) managing the liquidity of the new-issue markets when deficits are declining (by allowing Treasury officials to postpone a decision to discontinue a series without also being compelled to shrink new-issue sizes); (ii) actively promoting the liquidity of the new-issue markets (by repurchasing outstanding debt on a regular basis and funding the purchases with larger offerings of new debt); (iii) limiting the accumulation of large Treasury cash balances (for example, in the second half of April and early May, when many taxpayers make final payments of taxes on income earned in the prior year); and (iv) smoothing week-to-week fluctuations in Treasury bill offerings.

Suggested Citation

  • Kenneth D. Garbade & Matthew Rutherford, 2007. "Buybacks in Treasury cash and debt management," Staff Reports 304, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:304
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    References listed on IDEAS

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    Cited by:

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    2. W. Arrata & B. Nguyen, 2017. "Price impact of bond supply shocks: Evidence from the Eurosystem's asset purchase program," Working papers 623, Banque de France.
    3. Piotr Bartkiewicz, 2021. "The evolution of the Polish government bond market," Public Sector Economics, Institute of Public Finance, vol. 45(1), pages 149-169.
    4. Dimitri Vayanos & Jean‐Luc Vila, 2021. "A Preferred‐Habitat Model of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 89(1), pages 77-112, January.
    5. Vicente, José Valentim Machado & Guillen, Osmani Teixeira de Carvalho, 2013. "Do inflation-linked bonds contain information about future inflation?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(2), June.
    6. Dong Lou & Hongjun Yan & Jinfan Zhang, 2013. "Anticipated and Repeated Shocks in Liquid Markets," The Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1891-1912.
    7. Robin Greenwood & Annette Vissing-Jorgensen, 2018. "The Impact of Pensions and Insurance on Global Yield Curves," Harvard Business School Working Papers 18-109, Harvard Business School, revised Dec 2018.
    8. Ethan Struby & Michael F. Connolly, 2023. "Treasury Buybacks, the Fed's Portfolio, and Local Supply," Working Papers 2023-02, Carleton College, Department of Economics.
    9. Taeyoung Doh, 2010. "The efficacy of large-scale asset purchases at the zero lower bound," Economic Review, Federal Reserve Bank of Kansas City, vol. 95(Q II), pages 5-34.

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